ServiceNow (NOW) Rides on Expanding Generative AI Portfolio
ServiceNow NOW is having a terrific 2023, owing to its portfolio strength and expanding clientele. Its shares have returned 68.5% year to date, outperforming the Zacks Computer & Technology sector’s return of 44.4%.
ServiceNow’s expanding generative AI portfolio is driving prospects. It recently announced a major expansion to the Now Assist generative AI portfolio with the launch of Now Assist in Virtual Agent, Flow generation and Now Assist for Field Service Management.
These three new solutions help customers smoothen up their workflow and increase productivity. These help users by saving time on searching, summarizing and creating basic information, while enabling conversational self-service, incident deflection and workflow automation simultaneously.
Now Assist has rapidly been gaining traction with adoption by the likes of NVIDIA NVDA, Deloitte and Teleperformance. A U.S. Government agency is also using Now Assist. In fact, ServiceNow solutions have witnessed rapid adoption among federal agencies in recent times.
In third-quarter 2023, ServiceNow inked 19 federal deals worth more than $1 million, including three deals above $10 million. Annual Contract Value (ACV) for federal end-market jumped 75% year over year.
NVIDIA, which is also ServiceNow’s technology partner, will use ServiceNow Now Assist features like case summarization and question-answering to bring efficiencies to its operations.
ServiceNow, Inc. Price and Consensus
ServiceNow, Inc. price-consensus-chart | ServiceNow, Inc. Quote
The launch of Vancouver has been a game changer for ServiceNow’s generative AI portfolio. Vancouver embeds generative AI across all workflows on the Now Platform. It has also helped expand ServiceNow’s clientele. Currently, it has more than 300 customers in the pipeline from every industry, buying center and stage of testing.
ServiceNow Prospects Are Bright
ServiceNow has been benefiting from the rising adoption of its workflows by enterprises undergoing digital transformation. It had 1789 total customers, with more than $1 million in ACV at the end of the third quarter.
Strong portfolio, expanding partner base and clientele bode well for near-term prospects. For fourth-quarter 2023, subscription revenues are projected between $2.320 billion and $2.325 billion, suggesting a year-over-year improvement of 24.5-25% on a GAAP basis. At cc, subscription revenues are expected to grow 23-23.5%.
The Zacks Consensus Estimate for fourth-quarter 2023 revenues is pegged at $2.4 billion, indicating 23.47% year-over-year growth. The consensus mark for earnings is pegged at $2.78 per share, up 4.5% over the past 30 days.
For 2023, the company expects subscription revenues of $8.635-$8.640 billion (up $48 million at the mid-point), which suggests a rise of 25.5% from that reported in 2022 on a GAAP basis. At cc, subscription revenues are expected to grow 25% from the 2022 actual.
The Zacks Consensus Estimate for 2023 revenues is pegged at $8.93 billion, indicating 23.27% year-over-year growth. The consensus mark for earnings is pegged at $10.44 per share, up 4.5% over the past 30 days.
Zacks Rank & Other Stocks to Consider
ServiceNow currently has a Zacks Rank #2 (Buy).
Celestica CLS and Vertiv VRT are other top-ranked stocks in the broader Zacks Computer & Technology sector. Both companies sport a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Shares of Vertiv and Celestica have returned 216.9% and 148.9% on a year-to-date basis, respectively.
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